Pre-tax investment returns generated by Legal & General’s with-profits funds dropped to 3.1 per cent in 2015, down from 10 per cent a year previously.
This compared to 8.5 per cent over 25 years and 5.5 per cent over the last decade.
In addition, the insurer added bonuses totalling £366m to its with-profits policies last year, a fall of £21m on 2014.
L&G closed its with-profits funds to new business a year ago following a slump in sales post-RDR.
It says the lower bonus payments reflecting “a gradual reduction in the number of customers as policies continue to mature”.
L&G managing director of savings Jackie Noakes says: “One of the main advantages of a with-profits investment is the ability to protect our customers against short-term market volatility by ‘smoothing’ payouts.
“2015 was a challenging year for investment markets but we have actively allocated the fund across a broad spread of assets achieving another year of positive returns. This means that our with profits customers continue to see steady growth on their investments over the long-term, well in excess of inflation.”
The firm says a pension policy with a 15-year term for a male retiring at 65, and making £200 monthly contributions, has a retirement value of £56,253.